LOCAL RECORDS OFFICE – While it has been a decade since the 2008 recession, that triggered 1.2 million homes to foreclosure, some home values across the country have struggled to rebound. Housing prices across Pekin, Illinois in the Midwest have failed to reach pre-recession levels. Today nearly 2.5 million residential properties remain in negative equity, according to a new study Illinois home values stand 12% below peak recession prices. In Illinois, the median home value is $86,800 and home values have declined -5.3% over the past year and Zillow predicts they will rise 2.6% within the next year. The decline is relative to the new tax plan and higher mortgage rates, as homeowners are backing off the market say the Local Records Office.
And when you own a home in a high-tax area, like Pekin, Illinois, you will especially affected by the new $10,000 limit on how much and state and local tax, including property taxes, that you can deduct from your federal income taxes, unless your taxes are paid or accrued by doing a business or a trade.
The Illinois Association of Realtors says both the low inventory of homes available for sale and the state’s economic uncertainty contributed to the decline in sales
In the nine-county area, sales fell 8% in January to 5,777 homes, according to the association. In Chicago, sales fell 10.2% last month to 1,414 homes. Both drops were one of the biggest since November 2014.
And while “the uncertainty in the Illinois economy over the last two years have contributed to a dampening of housing demand in contrast to the generally positive outlook in the rest of the country,”Hewings said in a statement, the “declines in inventory are still exerting upward pressure on housing prices and thus reducing affordability.”
The median home sales prices were $224,000 last month in Chicago and are up 7.2% since January 2017. In Chicago, the median price rose 3.9% to $265,000 in January.
As the first time homebuyer may rent and not buy, Casper implies this could hinder the first-time buyers, in particular, creating a cascading effect.
Some are predicting the constraints of a low supply to the biggest issue facing the market last year and will continue to be a problem in the entry-level market. Some experts anticipate the prices will not rise nearly as fast because of the new law. While others say it will help first-time homebuyers with entering the market. While economists and housing experts agree these new rules have put home buyers in the wait-and-see mode, which will prompt a slowdown in the market.
Some realtors claim that capping the state and local tax deduction and lowering the cap on mortgage-interest deductions (MID) has caused many of us to worry about its big impact on the luxury real estate market, (especially high-tax coastal and urban markets). Realtor.com, the senior economist Joseph Kirchner, exemplifies that the mortgage interest rate deductions (MID) limitation will affect only about 1.3% of homeowners nationally and those concentrated in high-cost metros.
According to the Trulia’s chief economist, Ralph McLaughlin, the bill’s real impact will be felt at the local government level. Though, we are seeing changes in the previous months of buyers “cooling off” the market, Jamie Sneddon, an Associate Broker for Sotheby’s International Realty in Connecticut believes that the tax reform will help certain markets with pricing. Sneddon is using tactics to lure potential buyers leaving New York City.
Overall, the tax bill will change how money is in our bank account and how we file taxes. While some may have lower tax bills and be able to pay off their debts faster or put away money into a retirement account, some will have higher tax bills and have a harder time saving for the future.
With hopes of seeing stability in the housing market, there have also been new provisions under the Senate Bill 2155, the Dodd-Frank Reform bill
Can greatly impact the credit scoring models to also include utility and bill payment histories, among other predictive metrics and is paving the way for homeownership for the other millions of qualified buyers. The current credit scoring model used by Fannie Mae and Freddie Mac relies heavily on payment history of credit cards, mortgages and auto loans.
Though, with the new bill passed, the Fannie Mae and Freddie Mac will be forced to consider scoring systems out of Fair Isaac Corp.’s, the well-known FICO score, (the current credit score provider).
The NAR president Elizabeth Mendenhall explains “Fannie Mae and Freddie Mac are the largest mortgage purchasers in the nation, but they rely on credit score models that do not take into account factors as simple as whether borrowers have paid their rent or utilities on time.”
With its aim to relieve and loosen restrictions on lenders, rather, particularly smaller nonbanks or credit unions, may be in part to appease Democrats that might otherwise oppose the bill. Though, some progressive Democrats have concerns that the bill.
But the former Rep. Barney Frank, one of Dodd-Frank Act’s co-authors, is rejecting any concerns on the grounds and that the bill does not threaten “prohibitions about making shaky loans to people with weak credit and then packing them into a security.”
And lending standards are a lot stricter which is keeping some worthy buyers out of the market. So when the lending standards become more relaxed in the near future, it will allow some reasonable, credit qualified people back into the market.
There are a high number of investors and homebuyers that are concerned a housing market crash will take place
As long as Americans are employed, housing crashes are said to be unlikely. Though, a few experts including Harry Dent are convinced that a housing market disaster looms in the upcoming few years.
And a growing number of homeowners and buyers are speaking of a housing bubble. A housing bubble is when house prices grow above-average, due to something out of the norm, such as demand, speculation, overzealous investing, whereas it drives the prices up until they can no longer be supported. It is a matter of limited supply and increased demand that teeters too far into one direction; ie. a sudden and rapid growth in supply will drive housing prices down sharply.
One sign that home prices have escalated is that the national median family homes are 32% higher than inflation, similar to 2005. And similarly, the SPDR S&P Homebuilders ETF has risen 400% since March 2009, which outperformed the S&P 500 rise of 270%.
Ultimately, the homebuyers must not rush into buying a home, because the decision lands on your individual circumstances and it is better to be fully prepared financially before dipping into the market.
And in case you are looking into buying a home in 2018, this concern to a presumed increase of rates will take a year for the Federal Reserve to implement into its policy, and there are no foreseeable or major impacts to the Fed policy change. As no one can really predict the future of the housing market in 2018, in my opinion, it is better to have your money invested into a home than having your money continue to lose value sitting inside the bank.